Renewable energy in China, a strategic future?
August 2, 2005
With a host of environmental and domestic social concerns — and potential future international conflict — China could be well suited to pursue renewable energy sources.
China’s failed bid for American petroleum firm Unocal may prompt it to further focus on its development of alternative energy sources.
While China has been actively investing in exploration and development operations in Africa, South America, and other parts of Asia over the past five years, China has also significantly expanded its interests in renewable energy sources including wind, solar, biofuels, tidal, and small hydroelectric dams.
In February 2005, the government passed a renewable energy law that both requires power operators to buy electricity from alternative energy providers and provides economic incentives to such producers. China is striving to reduce its dependence on coal, which supplies 65-70% of the country’s energy needs but is responsible for a number of its energy-related environmental problems. According to a recent report by the World Health Organization (WHO), seven of the world’s ten most polluted cities are in China and almost two thirds of the country’s largest cities fail to meet the organization’s air quality standards. With its use of unwashed coal, China is the planet’s largest emitter of sulfur dioxide and acid rain plagues about a quarter of the countryside. The World Bank estimates that pollution is costing the country 8-12% of its $1.4 trillion GDP in direct losses (The Economist).
China has expressed a strong interest in cleaner coal-based technologies like coal liquefaction and gasification, but the government appears to put official hope in renewable energy, setting a target of 12% of its power generation capacity coming from renewables by 2020 — up from a mere 3% in 2003. The government’s interest in reducing China’s use of coal and petroleum products extends beyond environmental and health concerns; it sees both the strategic value of mitigating its reliance on foreign oil and the economic advantages of being on the technological leading edge of energy production.
The passage of the Renewable Energy Promotion Law appears to be the first step in making this goal a reality. The legislation, which takes effect in 2006, will give funding and tax incentives to renewable energy projects. Environmentalists hope the sheer size of the Chinese market will spur further interest in the economic prospects of renewable energy well beyond the borders of China.
“The development of China’s new renewable energy law, which is expected to be finalised early next year , has generated great interest internationally. China’s anticipated entry into the global renewable energy market is expected to have a profound impact on the global industry,” said Li Junfeng, Secretary General of the Chinese Renewable Energy Industry Association, in a release from environmental group, Greenpeace. ‘We have spent a lot of time and energy learning from the successes and failures of our partners in Europe and around the world. We believe that this law can start a renewable energy revolution in China.”
China is off to a quick start in its renewable energy push. The market for wind energy in China grew by 35% in 2004, while the government has sponsored research into the development of fuel cells and tidal power station technologies. In December 2004, the YaSheng Group, a $1.5 billion China-based agricultural and biotechnology conglomerate, purchased 80% of Montana-based fuel fuels firm Sustainable Systems, LLC, a maker and developer of biorefineries and bio-based fuels. With car demand expected to grow 12.5% this year, China, which already has the world’s largest biofuels plant, is working with European agencies to see how plant matter and animal waste-based fuels might serve as alternatives to fossil fuels.
All these developments are promising but whether China can actually meet its renewable energy goals is another question. With its decentralized government and historically poor local enforcement capabilities, only time will tell. An economy fueled by domestic renewable energy is certainly more sound than one built around polluting hydrocarbons lying in distant and sometimes hostile lands.
Related article: Asia sees sense in going green as oil prices rise (Reuters)
For energy-hungry Asian governments, the answer could literally be blowing in the wind. Across the region, renewable energy such as solar, wind and geothermal power is gaining ever greater credence as a way to curb the region’s appetite for oil and cut runaway import bills.
“CNOOC, for example, signed a deal two years ago to extract a million barrels of oil a day in Indonesia, and a year ago it signed a major contract to produce gas in Australia. In February, President Hu traveled to Gabon hoping to secure agreements in Africa. In June, he led a delegation from China’s natural gas industry to Uzbekistan to build the mainland’s presence in oil-and-gas-rich Central Asia. Chinese oil executives have even begun courting Ecuador and Colombia in hopes of buying oil in the U.S.’s backyard … China has invested a reported $15 billion in Sudanese oil projects, and Sudan nowadays supplies about 7% of China’s oil imports … Mainland oil companies have twice been foiled in their efforts to buy stakes in fields in Kazakhstan, and they haven’t secured any significant drilling rights in Central Asia or the Middle East. The fields that Chinese companies have so far bought into are already mature, and many experts feel they’ve overpaid.”
“Fueling the dragon: China’s race into the oil market.” Gal Luft. The Institute for the Analysis of Global Security. Accessed Aug 1st 2005:
China’s expectation of growing future dependence on oil imports has brought it to acquire interests in exploration and production in places like Kazakhstan, Russia, Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. But despite its efforts to diversify its sources, China has become increasingly dependent on Middle East oil. Today, 58% of China’s oil imports come from the region. By 2015, the share of Middle East oil will stand on 70%. Though historically China has had no long-standing strategic interests in the Middle East, its relationship with the region from where most of its oil comes is becoming increasingly important.
According to the EIA, “coal makes up the bulk, 65%, of China’s primary energy consumption, and China is both the largest consumer and producer of coal in the world. China’s coal consumption in 2002 was 1.42 billion short tons, or 27% of the world total.”
Adding it all up, the World Bank concludes that pollution is costing China an annual 8-12% of its $1.4 trillion GDP in direct damage, such as the impact on crops of acid rain, medical bills, lost work from illness, money spent on disaster relief following floods and the implied costs of resource depletion. With health costs escalating (see article), that figure will increase, giving rise to some grim prognoses that growth itself will be undermined. “Ignored for decades, even centuries, China’s environmental problems have the potential to bring the country to its knees economically,” argues Elizabeth Economy, author of “The River Runs Black”, a new book on China’s pollution.”
Greenpeace China Press Release. Sept 15th, 2004.
“China has made breakthroughs in fuel cell technologies and mastered the use of key materials and core technologies, according to Zhang Huamin, a researcher at the Dalian Chemistry and Physics Institute of the Chinese Academy of Sciences. He told the second Dalian Science and Technology Forum that China has succeeded in developing 100-30,000 watt hydrogen-oxygen fuel electrodes and cells for powering vehicles as well as proton-exchange technology, a key technology in fuel cell production, and 60-75 kw batteries.”
“China’s petroleum industry has undergone major changes over the last decade. In 1998, the Chinese government reorganized most state owned oil and gas assets into two vertically integrated firms — the China National Petroleum Corporation (CNPC) and the China Petrochemical Corporation (Sinopec). Before the restructuring, CNPC had been engaged mainly in oil and gas exploration and production, while Sinopec had been engaged in refining and distribution. This reorganization created two regionally focused firms — CNPC in the north and west — and Sinopec in the south, though CNPC is still tilted toward crude oil production and Sinopec toward refining. Other major state sector firms in China include the China National Offshore Oil Corporation (CNOOC), which handles offshore exploration and production and accounts for more than 10% of China’s domestic crude production, and China National Star Petroleum, a new company which was created in 1997.”
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